Review Paper

Topics: Total quality management, Contract, The Delivery Pages: 6 (1273 words) Published: January 1, 2011
Quicklink – ACCA Paper 3.3 June 2005

NB Candidates are advised to read all of the information including that contained in tables 1, 2 and 3 before attempting this question.

Quicklink operates in the distribution and haulage industry and has achieved significant growth since its formation in 19X7. Its main activities comprise the door-to-door delivery of mail, parcels and industrial machinery.

The information contained in notes (i-vii) below relates to Quicklink in respect of the year ended 31 May 20X5 and changes planned in the year ending 31 May 20X6.

(i)Contracted clients were charged at the following rates during the year ended 31 May 20X5: Mail $6 per delivery, Parcels $10 per delivery and Machinery $200 per delivery.

(ii)Rates for non-contract clients during each of the years ended 31 May 20X5 and year ending 31 May 20X6, were/are based upon the contracted client rates per delivery plus an additional percentage fee per delivery charged to non-contract clients as follows:

|Activity |Additional Fee | |Mail |40% | |Parcel |20% | |Machinery |50% |

(iii) On 1 June 20X3, Quicklink entered into a fixed price contract for the provision of fuel for its delivery vehicles for the three-year period ending 31 May 20X6. For the year ending 31 May 20X6 fuel costs will be as follows:

(a) $0.10 per kilometre in respect of the delivery of mail and parcels. (b) $0.50 per kilometre in respect of the delivery of industrial machinery.

Each vehicle owned by Quicklink is in use for 340 days per annum.

(iv) Employee salaries were paid throughout the year ended 31 May 20X5 at a rate of $26,400 per employee, per annum.

(v) Sundry operating costs (excluding fuel and salaries) of Quicklink amounted to $3,000,000 during the year ended 31 May 20X5.

(vi) The board of directors expect that for the year ending 31 May 20X6 the following will apply:

(a) Contract rates of Quicklink business will increase by 5%. (b) Sales volumes are expected to remain at the same level as in the year ended 31 May 20X5. (c) Salaries and other operating expenses will increase by 4%.

(vii) The board of directors agreed to purchase Celer Transport, an unincorporated business, which was founded in December 20X1. The purchase took effect on 1 June 20X5. Celer Transport has main activities comprising the delivery of mail, parcels and processed food. The managing director of Quicklink has expressed his view that 'the acquisition of the Celer Transport business would constitute a good strategic move even though it is expected to make a loss of $50,000 during the year ending 31 May 20X6'.

The information contained in notes (viii–xii) below relates to the business of Celer Transport in respect of the year ending 31 May 20X6:

(viii) A distinctive competence of the Celer Transport business relates to its success in winning contracts with major food producers. Each contract is for a fixed term of three years and all contracts were renewed on 1 June 20X5. Contract values per annum are as follows:

| Number of contracts |Value per contract | | | $ | |4 |225,000 | |6...
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